{"id":23024,"date":"2021-06-18T19:21:11","date_gmt":"2021-06-18T19:21:11","guid":{"rendered":"http:\/\/localhost:10053\/what-do-the-terms-perpetuity-and-spend-down-mean\/"},"modified":"2025-05-23T13:13:46","modified_gmt":"2025-05-23T20:13:46","slug":"what-do-the-terms-perpetuity-and-spend-down-mean","status":"publish","type":"post","link":"https:\/\/www.insidephilanthropy.com\/explainers\/what-do-the-terms-perpetuity-and-spend-down-mean","title":{"rendered":"What Do the Terms \u201cPerpetuity\u201d and \u201cSpend Down\u201d Mean?"},"content":{"rendered":"\n<div style=\"margin-bottom:2%\" class=\"wp-block-genesis-blocks-gb-container explainer-heading gb-block-container\"><div class=\"gb-container-inside\"><div class=\"gb-container-content\">\n<div class=\"wp-block-genesis-blocks-gb-columns gb-layout-columns-3 gb-3-col-equal\"><div class=\"gb-layout-column-wrap gb-block-layout-column-gap-2 gb-is-responsive-column\">\n<div class=\"wp-block-genesis-blocks-gb-column gb-block-layout-column gb-is-vertically-aligned-top\"><div class=\"gb-block-layout-column-inner\">\n<figure class=\"wp-block-image size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"500\" height=\"400\" src=\"https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/learning-center-icon-new.png\" alt=\"\" class=\"wp-image-23311\" style=\"width:150px\" srcset=\"https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/learning-center-icon-new.png 500w, https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/learning-center-icon-new-300x240.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/figure>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-genesis-blocks-gb-column gb-block-layout-column gb-is-vertically-aligned-top\"><div class=\"gb-block-layout-column-inner\"><div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"750\" height=\"381\" src=\"https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/explainer-logo-for-detail-page.png\" alt=\"\" class=\"wp-image-23078\" style=\"width:300px\" srcset=\"https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/explainer-logo-for-detail-page.png 750w, https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/explainer-logo-for-detail-page-300x152.png 300w\" sizes=\"auto, (max-width: 750px) 100vw, 750px\" \/><\/figure><\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-genesis-blocks-gb-column gb-block-layout-column gb-is-vertically-aligned-top\"><div class=\"gb-block-layout-column-inner\" style=\"text-align:center\">\n<p><\/p>\n<\/div><\/div>\n<\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-genesis-blocks-gb-container gb-block-container\"><div class=\"gb-container-inside\"><div class=\"gb-container-content\">\n<ul class=\"wp-block-list\">\n<li>A foundation can be set up to exist in perpetuity \u2013 that is, forever.<\/li>\n\n\n\n<li>Or a foundation can decide to spend down its assets in a specific period of time.<\/li>\n\n\n\n<li>Nearly all private foundations were endowed to exist in perpetuity.<\/li>\n<\/ul>\n\n\n\n<p>Under current U.S. law, a <a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-a-private-foundation\">private foundation<\/a> is required to pay out at least 5% of the value of its assets every year. This 5% includes both grants and the foundation\u2019s core operating expenses. The key phrase here is \u201cat least.\u201d&nbsp;<\/p>\n\n\n\n<p>A foundation\u2019s assets comprise its <a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-an-endowment\">endowment<\/a>, or the pile of money. An endowment might be created by one big contribution from the founder when they establish the foundation. Or donors might add to the pile with new contributions over time. The money then sits in any number of types of accounts, but is almost always <a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-impact-investing\">invested<\/a> in some way, which means it grows over time.&nbsp;<\/p>\n\n\n\n<p>Since the average rate of return on investments is higher than 5% (closer to 10%), a foundation could spend the required 5% of the value of its assets every year and continue to have money to give away in perpetuity\u2014or pretty much forever. This is how the Ford Foundation, Carnegie Foundation, MacArthur Foundations and many, many others continue to be among the largest foundations in the world, without any \u201cnew\u201d contributions.&nbsp;&nbsp;<\/p>\n\n\n\n<p>While still reasonably rare, a foundation could choose to give away more than 5% of the value of its assets each year and \u201cspend down\u201d its endowment faster than the rate of return on its investment. A founder or foundation board could choose a specific time frame\u2014whether that\u2019s one year or 100\u2014and figure out how much it needs to give away each year to spend down its endowment in that timeframe. (Such foundations are also sometimes called \u201climited life\u201d foundations.) Small foundations tend to be most likely to spend down, or sunset, but several large foundations have also done this\u2014most notably, Chuck Feeney\u2019s Atlantic Philanthropies, which spent $8 billion over a period of 30 years.&nbsp;<\/p>\n\n\n\n<p>Most foundations are set up to exist in perpetuity. Some say that\u2019s a core feature of a foundation\u2014that it endures for generations, serving the mission the founder intended well beyond her or his lifespan. But a founder who wants to make a big impact during their lifetime\u2014or, say, on some timely issue in the next five years\u2014might choose to spend down quickly instead.&nbsp;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">You might also want to check out:<\/h2>\n\n\n\n<p><a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/debate-should-foundation-payout-be-higher\">Debate: Should foundation payout be higher?<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-an-endowment\">What is an endowment?<\/a><\/p>\n\n\n\n<p><\/p>\n<\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p class=\"\">Under current U.S. law, a private foundation is required to pay out at least 5% of the value of its assets every year. This 5% includes both grants and the foundation\u2019s core operating expenses. The key phrase here is \u201cat least.\u201d<\/p>\n","protected":false},"author":470,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":true,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"content-sidebar","footnotes":""},"categories":[26779],"tags":[26780],"ppma_author":[32648],"class_list":{"0":"post-23024","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-explainers","7":"tag-ip-explainer","8":"author-ipstaff","9":"entry"},"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"IP Staff","author_link":"https:\/\/www.insidephilanthropy.com\/author\/ipstaff"},"authors":[{"term_id":32648,"user_id":470,"is_guest":0,"slug":"ipstaff","display_name":"IP Staff","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/?s=96&d=mm&r=g","author_category":"","first_name":"IP Staff","writer-profile":"","last_name":"","user_url":"","job_title":"","linkedin":"","instagram":"","twitter":"","facebook":"","description":""}],"_links":{"self":[{"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/posts\/23024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/users\/470"}],"replies":[{"embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/comments?post=23024"}],"version-history":[{"count":3,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/posts\/23024\/revisions"}],"predecessor-version":[{"id":213185,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/posts\/23024\/revisions\/213185"}],"wp:attachment":[{"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/media?parent=23024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/categories?post=23024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/tags?post=23024"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/ppma_author?post=23024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}